Steps to Buying a House

Home Finance Tips, Lenders & Getting Approved!

Several things need to be considered when it comes to finance for your new Hervey Bay property including— how to get pre-qualified for your mortgage, choosing the best lender for your circumstances and other vital financing decisions.

STEP 1: HOW TO GET A MORTGAGE PRE-APPROVED

The very first-step to buying a property in Hervey Bay is knowing exactly how much money your bank will lend you. Pre-qualifying for a mortgage involves the lender looking at your income, debts and deposit.

Before getting your heart set on a specific Hervey Bay property; your lender will require proof of income along with your credit history report to pre-qualify you for how much you can borrow. Once you have your finance options sorted out, take it to the next level by getting it in writing as a mortgage pre-approval (typically valid for 90 or 120 days) which also includes an interest rate guarantee.

Obviously, a mortgage pre-approval doesn’t guarantee that the lender will lend you a specific amount of money for any home of your choosing, as the value of the property must be worth at least the amount of money being offered. It’s customary for the lender to order an Independent Valuation before any money is advanced ensuring that the amount paid for the property is correct as the bank or lender is co-buying the property with you by lending you the money.

A mortgage pre-approval ensures that you know exactly how much money you can borrow and assists you with targeting houses within the price range that you can afford. Not only does this enable you to better focus your property searching efforts but it also eliminates both uncertainty and risk when financing your preferred property when you find it. Likewise, a pre-approval is useful if purchasing a property through an auction.

STEP 2: HOME FINANCE DECISIONS

Obtaining home finance or a mortgage often appears intimidating, especially for the first-time homebuyer. After qualifying for a mortgage, there are several basic decisions to make before taking possession of your new Hervey Bay property— primarily the term (length) of the mortgage, type of mortgage, amortization and the interest rate.

For specific information on each of these terms, please read on. Also, feel free to use the Mortgage Calculator to estimate your monthly payments.

Mortgage Term & Amortization

The mortgage term (length) and amortization period directly affect how much money you can borrow and dictates your monthly repayment amount as well as the maximum price of the property you can purchase.

Mortgage Term: This is the length of time a lender will lend you money for— generally six months to 25 years. At the end of the term, any outstanding amount must be paid in full or a new finance option (term) must be organised. Although tricky; choosing a mortgage term wisely simply means examining and understanding marketplace trends along with any potential risks associated with the various term options available. For example; if you chose a six-month term and the interest rate increased drastically; you may be able to afford the higher repayment amount.

Amortization: Not many people (if any) can pay off the entire principal of a mortgage in a 12-month term or a five-year term as the repayment amounts would be huge! Instead lenders assist borrowers by calculating or amortizing mortgage payments over a longer period (even up to 25 – 30 years). Rather than financing you for a single 25-year period, the payment schedule is calculated by periodic payments of principal and interest based on the longer time frame. You usually have the option to renew the mortgage and change the amortization based on your current financial situation and/or market conditions. A longer amortization period means lower repayments, but with more interest payable.

Payments

Typically, home finance payments comprise of two parts: a principal and an interest component— referred to as a blended mortgage payment paid on a regular basis (weekly, bi-weekly or monthly) over the mortgage term. The loan payment amount usually remains the same but the outstanding principal portion increases while the outstanding interest portion decreases.

There are many ways to lower the remaining outstanding balance resulting in paying less interest. Strategies include making extra lump sum payments or accelerating your payments by perhaps paying weekly or fortnightly instead of monthly— your lender can assist you with the finance strategy that best suits your circumstances.

Interest Rates

Interest is the cost of borrowing money, fluctuates with the economy and are one of the largest contributing factors to how much you ultimately pay for your Hervey Bay property; both monthly and over the life of your mortgage! Your interest rate you choose at the start of your term may significantly affect your monthly mortgage payment amounts. There are two main types of mortgage product interest rates— a fixed rate or a variable rate.

Fixed-Rate Mortgage: (FRM) is a fixed-rate home finance loan whereby the interest rate does not fluctuate during the term of your home loan. The main advantage of this strategy is that you know exactly how much interest is being paid. In an economy where interest rates are increasing, this strategy is great but if interest rates are going down— you may be stuck paying more than the lower rate that becomes available. A crystal ball would be very nice!

Variable-Rate Mortgage: (VRM) is a home load where the interest rate changes (fluctuates) as market interest rates change. Your payment amounts will vary although some variable-rate mortgages do include a fixed rate for a specific period (usually one to five years). When the rate fluctuates, the amounts allocated to the principal and interest vary depending on the interest rate at that time. If the rate goes down, more of your monthly payment goes to paying off the principal reducing the term of your mortgage. However, if the rate increases it’s a completely different story as the interest due goes up with less paid off the principal. In some circumstances, lenders will allow borrowers to convert to a fixed-rate mortgage if the need arises.

Types of Mortgages

Conventional Mortgage: This is the most common type of mortgage where the lender will lend up to 95% of the purchase price of the property or lender valuation value (whichever is lower). A minimum of 5% deposit (20% preferred) is usually required.

Second (& Third) Mortgages: These are used when additional financing arrangements are required behind an existing mortgage and are typically secured by your property. These loans usually incur a higher interest rate with a shorter term than the first or conventional mortgage.

High Ratio Mortgage: If you don’t have 20% deposit to get a conventional mortgage, up to 95% of the property’s purchase price or appraised value may be advanced by the lender with this type of loan structure. However, the government insists that you take out mortgage insurance against default since you have less than 20% deposit but the additional cost of insurance is usually added to the loan principal.

STEP 3: CHOOSE A LENDER

There are various kinds of lenders and mortgages out there and it’s wise to go to at least three different lenders:

Your Own Bank. They have your bank accounts, credit cards and investments so they should be motivated to give you a good rate.
A Mortgage Broker. Mortgage brokers work with a lot of different lenders and will go to them on your behalf to find the best mortgage rate and terms. Usually, broker fees are paid by the banks, so it’s a good way to comparative shop without having to do all the leg work yourself.
It’s important to note that not all of these decisions have to be made before you start looking for a home; the crucial step is getting a pre-approval from a lender—then you’re ready to start the search! Details regarding term, rate and even which lender you use can be decided—and changed—after the actual purchase, all the way up until reasonably close to your closing date (the date you take possession of your new place). However, the more you understand about your options, the better prepared you will be when that magical day comes.

REAL ESTATE AGENT ROLE REGARDING FINANCE

• Keep Things Real: Taking into account any financial considerations to match what you want, with what you can afford and developing strategies to help you afford what you want.
• Be willing and able to take you through the real costs of owning a home – and help you navigate the mortgage and financing waters.
• Put you in touch with the very best home finance lenders and mortgage brokers in Hervey Bay.

Want More Information About Financing a Property?

*Read our helpful finance-related blog posts for Buyers

House Hunting Like a Pro

House Hunting – and the fun begins! Whether you’re conducting a property search online, hitting open houses or searching with an AGENT, hunting for your dream house or unit is both a science and an art. Here’s what’s involved:

STEP1: DEVELOP YOUR WISH LIST

Knowing what you need and want in your home is critical when it comes to house hunting. What are your must-haves, your nice-to-haves, and your no-way-absolutely-nots? How many bedrooms do you need? What kind of outdoor space do you want? What about counter-tops, appliances and floors? You can’t get what you want if you don’t know what you want. Of course, location will be a big decision – which Hervey Bay suburb makes you feel at home? Check out our Hervey Bay Suburb Guides for some insider scoop on Hervey Bay’s hottest suburbs and make sure to read up on the Best Hervey Bay Suburbs for Return on Investment and the Best Hervey Bay Suburbs for First-Time Buyers.

Of course in a hot market like Hervey Bay’s, compromise is a big part of the house hunting process. Almost everyone needs to compromise on something, and it usually comes down to 4 things: size, finishes, location and price. What’s most important to you? Would you rather live in a bigger house or be closer to town? Are you OK spending more money for a renovated house or would you consider buying a cheaper house and then do the renovations yourself? Would you look at living on a busy street to more affordably be in a better suburb with access to better schools?

STEP 2 – PICK YOUR TEAM

Buying a house or unit will likely be the biggest purchase you’ll ever make – but don’t worry, you don’t need to do it alone. You’ll want to start by picking a Great Hervey Bay Real Estate Agent who works exclusively for YOU. You’ll also need a lender to take you through your financing options, and a lawyer to help with the legal aspects of the purchase. There are thousands of professionals out there (of varying quality), so ask your friends and family for recommendations, do your research and don’t be afraid to interview multiple people.

STEP 3 – HOUSE HUNTING ONLINE

You aren’t alone: 98% of Australians search for their home online. While there are endless real estate websites out there, here are the ones you should consider:

Realestate.com.au and domain.com.au are both leading Australian real estate websites for researching the market place. Both websites pull available properties for sale directly from the system that agents use. The internet is usually a day or two behind what’s happening in the market, but either are a great tool to explore what’s for sale and start getting a feel for what’s available.

Custom Listings is another way to get quick and easy access to what’s available is to have a real estate agent e-mail you daily listings of available houses and units that match what you’re looking for.

Tips About Looking for a Hervey Bay Home Online

• Keep an open mind. Photos aren’t always representative of what the house looks like in real life. A 3D Interactive Video Tour is the best option for viewing a home online.
• Don’t always believe the description and read between the lines. ‘Ready to put your decorator touch on it’ often means the property needs a lot of work.
• Remember that the asking price is very different than the sale price. In a hot market like Hervey Bay’s, houses often sell for far more than the listing price. If you want to know actual sale prices, sign up for our monthly Suburb Reports that       give you all the inside scoop.
• If you’re shopping for a unit, keep in mind that what’s included in the Body Corp fees as they varies from building to building, so it isn’t easy to compare units. A lower Body Corp fee might still mean more monthly costs
• Take some time to learn how to read agent listing – all those acronyms are guaranteed to confuse you.

STEP 4 – HOUSE HUNTING IN REAL LIFE

This is your opportunity to get a feel for the different Hervey Bay suburbs, refine your wish list, and ask questions. While a wish list seems kind of scientific and is a useful tool in deciding which properties to visit, the truth of the matter is that most people walk into their perfect home and just feel it. Of course, it helps when it satisfies your needs and wants too, but don’t underestimate the power of ‘just knowing’.

After looking at photos or viewing an 3D Interactive Open Home Video; you can visit homes for sale in real life with your real estate agent or by attending an open house. Keep in mind that not all properties will have open houses, so working with a real estate agent you trust the only way to guarantee that you’ll be able to see the houses or units you want to see (and on your schedule!).

Tips About Looking at Hervey Bay Homes in Real Life

1. Make a Plan
       Hervey Bay is a big coastal city, and if you’re like most people, you have a few target suburbs. Try to focus on one suburb at a time and don’t forget about traffic and the time it’ll take you to park.
2. Car Pool
       If you’re looking at houses or units with a real estate agent, let them do the driving. Your attention is better focused on the actual suburbs rather than when to turn left. If you’re checking out open houses, try walking or biking to them –
       Hervey Bay locals love open houses, and street parking can be a drag.
3. Wear Slip On/Slip Off Shoes
       You’ll be taking your shoes off dozens of times, so save yourself the hassle of lace up shoes. Wearing socks will also save you in the houses.
4. Don’t Just Focus on the House or Unit- Focus on the Suburb
       Drive around the suburb. Locate the schools, parks and shopping. Take a walk down the street and check out the neighbors. Make a point of going to a cafe, restaurant or pub in the area.
5. Vary the Time of Day That You House Hunt
       Everything looks better when the sun is shining, but it’s important to get a feel for the house or unit and the suburb during the day AND at night.
6. Experience the Bad With the Good
       Every suburb has its drawbacks, so make a plan to experience them. Thinking of buying on the esplanade? Make sure to check it out when there are throngs of tourists jamming the streets.
7. Take Notes & Photos
        It’s surprising how quickly you can forget the first house or unit you saw. And no, you’re probably not allowed to take photos of other people’s houses, but it happens all the time. Just don’t go posting them online.
8. See Past the Disgusting & Gross
       You’ll probably be surprised to find out how some people live, but don’t let someone’s bad decorating styles, outdated tastes and lack of housekeeping get in the way of finding your perfect Hervey Bay house or unit.
9. Don’t Fall in Love with the Seller’s Stuff
       This happens all the time and that beautifully staged unit won’t look nearly as great with all your IKEA stuff in it. Try to imagine your furniture and style.

REAL ESTATE AGENTS ROLE IN HOUSE HUNTING

1. To help you match what you want with the greatest opportunity for ROI. They will examine your needs, wants and must-haves to create a picture of your ideal home or investment property.

2. To stay on top of new properties in the best Hervey Bay suburbs as they come on and off the market; sending you daily listings of what’s available and monitor what’s happening, as it happens.

3. To be your house-hunting partner on YOUR schedule. We can take you to see any property that’s for sale and sometimes even ones that aren’t.

4. To save you time. Preview properties on your behalf and screen what is or is not for you, saving you time and hassle. To send you video profiles of what they see out in the field.

WANT TO READ MORE ABOUT SHOPPING FOR A HOUSE OR UNIT?

Informative blog posts on house hunting coming soon

Making an Offer on a House

The process of making an offer on a house or unit is very exciting as well as a little bit nerve-wracking. You’ve found that Hervey Bay property that meets your wants and needs, is in the price range you can afford and just feels right— your house hunting days are over! Let the fun begin!

Making an offer on a house starts with drafting the Agreement of Purchase and Sale (a legally binding document) that contains everything to do with the property purchase including the price you are willing to pay, any specific inclusions you want (the big screen TV, washer/dryer, etc) your preferred closing date (date you want to take possession) and any additional conditions that need to be met if the deal is to go through.

After the offer has been submitted, the seller has a few options— accept your offer, reject it or to sign back with a counter offer. You may have to compromise during these back-and-forth negotiations; but a reputable real estate agent will work very hard to get what you want.

And if you find that you are in a bidding war— be sure to read up on 1) Bidding Wars and 2) How to Win in Multiple Offers!

Meet Conditions & Provide Deposit

Any requirements within the Agreement of Purchase and Sale which must be met for the deal to go through are known as conditions— examples include a financing condition, a requirement allowing your lawyer to evaluate the legal details about the property or even a home inspection.

Obviously, a deposit needs to be paid— in Queensland, an amount of up to 10% of the purchase price is typically payable and held in trust until settlement. Once all conditions have been met and the agreement becomes firm— it’s a matter of waiting for the much-awaited closing date (settlement) and of course to get PACKING!

WHAT TO EXPECT FROM YOUR REAL ESTATE AGENT REGARDING NEGOTIATION WHEN MAKING AN OFFER ON A HOUSE

1. Your real estate agent should have— kick-ass top-notch negotiation skills when it comes to making an offer on a property!
2. That means at negotiation time he/she will stand up for you and not be bullied or pressured into making a move that simply doesn’t sit right with you.
3. He/she will scrutinise and decipher all the fine print as well as remove any mystery from the financing aspects and legal matters ensuring that YOUR interests are totally protected.
4. To be your coat of armour that will effectively safeguard you as you enter the battle-field of buying a property.

WANT TO READ MORE ABOUT NEGOTIATIONS AND OFFERS?

Making an Offer on a Property Blog Posts for Buyers coming soon

House Settling, Conveyancing & Property Settlement

With a secure deal in place; whereby both the seller and you agree on price and settlement terms, you’ve paid the deposit and there are no additional conditions to waive— the house settling (closing) process begins. Congratulations as you are almost there!

You’ll need to be in regular contact with both your lawyer and lender, as both require a load of information and money from you.

You will be especially busy the days just prior to settlement as there’s a tonne of paperwork you’ll need to sign off on, pay the outstanding balance owing by a certified cheque (clear funds) and finally pick up your keys!

Settlement is that point of time when ownership and possession of the property transfer from the Seller to YOU. It’s exciting and can be stressful but since it occurs after the legal and financial obligations are met— it’s a TEAM effort between YOU, your lender and your lawyer so rest assured the process is typically straightforward with little, if any complications.

COSTS OF PURCHASING A HOME

It’s a good idea to understand the various expenses associated with purchasing a home and your accountant, lawyer and real estate agent can assist with estimating approximately how much it will cost you. Some costs typically incurred are:

• Deposit Payment— (minus any amount initially paid as deposit)
• Land Transfer Taxes*
• Lender Fees— if applicable (including application costs, appraisal fees, , etc.)
• Adjustments— may include pre-paid taxes, rates, utilities, other expenses the seller paid for past the settlement date requiring reimbursement during the house settling / closing process.
• Legal Fees— and any applicable taxes, etc.

Read our informative blog posts on Settlement Costs outlining all the closing outgoings associated with buying property in Hervey Bay and your Real Estate Lawyer Role.

You will need to pay the outstanding balance owed on your new home to your lawyer with a certified cheque before settlement (when you take possession of your new home)— the final amount will have been calculated by your lawyer.

And if you are a first-home buyer; there are some excellent government programs which will save you thousands of $ in house settling costs. *Check out our first-home buyer programs report

WANT TO KNOW MORE ABOUT HOUSE SETTLING?

Informative blog posts on house settling coming soon